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9, 1986, petitioner's management team recommended to its board
that an offer be made to acquire Brock Exploration in exchange
for common stock of petitioner. By resolution dated September 9,
1986, petitioner's board authorized an offer of petitioner's
common stock having a fair market value between $7 million and
$10 million in exchange for 100 percent of Brock Exploration.
Although Brock Exploration had net operating losses (NOL's),
petitioner's offer did not include consideration for those
losses. On September 16, 1986, Messrs. Jackson, Billings, and
Reed met in New Orleans, Louisiana, with Mr. Brock to discuss
petitioner's offer to acquire Brock Exploration. Petitioner's
offer was rejected, and the Brock Exploration deal died.
When the Brock Exploration acquisition fell through, Mr.
Jackson reopened communications with Equitable Oil. Discussions
with Equitable Oil soon terminated, however, because it became
apparent that petitioner could not offer enough to make the deal
work.
During November 1986, prior to its acquisition of Tri-Power,
petitioner's acquisition efforts were wholly unsuccessful.
3. Plans To Adopt a Holding Company Structure
It is common for publicly owned oil and gas companies to
operate using a holding company structure (i.e., a parent company
with an operating subsidiary). Shortly after its organization,
petitioner's management team began considering the idea of
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